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What are the Tax Benefits of Owning a Home

What are the Tax Benefits of Owning a Home

What are the tax benefits of owning a home?

  

A: Owning a home can provide significant tax benefits. As such, it’s important to learn the tax impact so you know which home-related expenses to claim to maximize your return potential.

 

Tax benefits of buying a home

 

Purchasing a home offers the buyer several tax benefits.

 

First, with the exception of very large loans, you can generally deduct the cost of the points you paid when securing your mortgage. Second, if you are an active-duty member of the armed services, you may be able to deduct your moving expenses from your taxable income if you need to move because of a permanent change of station due to a military order.

 

Tax benefits of owning a home

  

There are multiple ongoing tax benefits to owning a home:

 

  • Mortgage interest deduction. Most homeowners can deduct the interest paid on their mortgage from their taxable income. 

  • Real estate taxes. The money you pay in property taxes is deductible from your taxable income. 

  • Private mortgage insurance (PMI). If you took out a loan that was equal to less than 20% of the home’s value, you may be able to deduct your PMI payments from your taxable income. 

  • Home equity debt. If you’ve taken out a home equity loan or line of credit against your home, the interest payments on these loans can be deducted from your taxable income, as long as the loan is used to expand or improve your home.

  • Home office expenses. If you use a part of your home exclusively for work purposes, you may be able to deduct related expenses.

 

Are there any tax credits available for homeowners?

 

You may be eligible for a mortgage credit if you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local governmental unit or agency under a qualified MCC program. In addition, you may be able to claim a credit for the costs of buying and installing items that help your home harness renewable energy.

 

Home ownership has advantages, including tax benefits. Keep that in mind as you explore options, and as with all tax advice, do consult a tax professional for current and accurate laws.

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